What is Data Mining?
Data mining is a process wherein data is analyzed and summarized to make it useful for a particular business. Commonly, data from customers are gathered and reviewed for purposes of knowing their behavior and spending habits among others. These data is then used for different purposes like improving customer service or expanding customer base.
In the business point of view, the process of data mining starts with data collection. One wouldn’t be able to do analysis and forecasts if there are no data to manipulate with. Most companies already have some sort of data from their existing customers like names, age, sex, and products purchased or services availed. The main goal in this initial process is to have the particular data that the company needs or data that can be used for analysis.
When data is collected, the next process involved is the algorithm or the method of analyzing this particular data. There are various statistical methods available and each company must select the appropriate system according to its own needs. For analysis of quantitative data like age, weight, or speed, one may use the Regression technique. This involves a statistical formula in handling gathered data. In simple terms, using this technique only requires feeding the data into the formula and it will give you quantitative results ready for interpretation.
Another method is called Classification. This involves data filtering depending on the characteristics and specifications. Like in determining consumer spending behavior, data may be filtered and divided according to demographics which will help companies analyze which age group is buying which type of product and which gender is availing services and taking advantage of promotional efforts.
Various companies in different industries employ data mining techniques to understand their customers better. Some analyze customer data to improve on their existing services and products. Others take advantage of the data gathered to expand their customer base and widen market share. Whatever the company’s purpose is, data mining is considered essential for success.